Institution of Chemical Engineers

Council’s annual report and

consolidated financial statements for the

year ended 31 December 2017

Contents

Council’s Report 1

Statement of Council’s responsibilities 14

Independent Auditor's Report to the Trustees of the Institution of Chemical Engineers 15

Consolidated statement of financial activities for the year ended 31 December 2017 17

Charity statement of financial activities for the year ended 31 December 2017 18

Balance sheets at 31 December 2017 19

Consolidated cash flow statement for the year ended 31 December 2017 20

Charity cash flow statement for the year ended 31 December 2017 20

Notes forming part of the financial statements for the year ended 31 December 2017 21

1

Council’s Report

Council is pleased to present its annual report together with the financial statements of the charity and its subsidiaries

for the year ending 31 December 2017.

The financial statements comply with the Charities Act 2011 and Accounting and Reporting by Charities: Statement

of Recommended Practice applicable to charities preparing their accounts in accordance with the Financial

Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) (effective 1 January 2015).

Reference and Administrative Details

The Institution of Chemical Engineers (IChemE) is a registered Charity in England and Wales (charity number

214379) and a charity registered in Scotland (SC039661).

Principal Office

Davis Building, Railway Terrace, Rugby, Warwickshire, CV21 3HQ

Auditors

RSM UK Audit LLP, St Philips Point, Temple Row, Birmingham, B2 5AF

Main Bankers

NatWest Bank Plc, Silbury House, 300 Silbury Boulevard, Milton Keynes, MK9 2ZF

Solicitors

Hill Hofstetter, Trigen House, Central Boulevard, Blythe Valley Park, Solihull, B90 8AB

Mills & Reeve, 100 Hills Road, Cambridge, CB2 1PH

Investment Managers

Rathbone Investment Management Limited, 8 Finsbury Circus, London, EC2M 7AZ

Ruffer LLP, 80 Victoria Street, London, SW1E 5JL

Trustees

The Trustees serving through the year were as follows:

Council Members

1 January 2017 – 10 May 2017

Council Members

From 10 May 2017

Elected members Co-opted members Elected members Co-opted members

Prof JPK Seville Mr WJ Harper Mr JM McGagh Mr WJ Harper

Dr A Jamieson Mr PR Ellis Prof JPK Seville Mr PR Ellis

Mr JM McGagh Dr JP Sherlock Mr KJ Rivers Prof D York

Mr KJ Rivers Prof R Amal Mr IJ Martin Prof R Amal (to 1 Jan 2018)

Mr SF Harrow Dr Abdul Aziz Abdul Raman Dr J Glassey Dr Abdul Aziz Abdul Raman (to 1 Jan 2018)

Mr IJ Martin Mr D Platts Prof L Gladden Mr D Platts

Dr J Glassey Mrs AMW Black Mr S Moran (to 27 Sept 2018) Mrs AMW Black

Prof L Gladden Prof C Webb Prof C Webb

Mrs JV Atkinson Mrs JV Atkinson

Chief Executive

Mr J Prichard (from 30 Jan 2017)

Senior Management Team

Mr N Atkinson: Director Qualifications & International Development (to 28 Jul 2017)

Mr J Blades: Deputy Chief Executive, Chief Operating Officer

Ms J Downham: Director Finance & Business

Mrs C Flavell-While: Director of Policy & Publications

Mr A Furlong: Director of Communication & Brand Development

Mr P Slane: Director Australia & New Zealand

Mr M Cloke: Director South East Asia (3 Jan 2017 to 22 Dec 2017)

2

Objectives and activities for the public benefit

The Institution of Chemical Engineers (IChemE) is a professional body committed to advancing the practice of

chemical engineering worldwide for the benefit of society.

In support of this core purpose we promote a wide awareness of the role of chemical engineering. We develop,

maintain and administer standards of professionalism, education, safety and engineering practice. We work to attract

a broad range of talent from diverse backgrounds into the discipline, and we inspire young professionals to develop

their competence to ensure that society is protected.

We assess applicants for membership through a rigorous peer review process thereby promoting professional

development and competence in all those who enter the profession.

By promoting high standards, we encourage chemical engineers to deliver economic benefit and wellbeing without

causing harm to society or the planet.

Through the knowledge and expertise of our members we inform policy development and advance the practice of

chemical engineering. We recognise and celebrate excellence; we undertake informed advocacy on behalf of

chemical engineering and chemical engineers; and share the message that chemical engineering matters.

The object of the Institution as set out in the Royal Charter is:

to promote, foster and develop the general advancement of the science of chemical engineering in all its branches as

an end in itself and as a means of furthering the scientific and economic development and application of processes in

which chemical and physical changes of materials are involved and to promote, assist, finance and support such

research, investigation and experimental work in chemical engineering as the Institution may consider likely to

conduce to those ends and to the benefit of the community at large.

The powers vested in the Institution to achieve these objects are:

▪ To hold meetings of the Institution for reading and discussing papers and communications bearing upon the

science of chemical engineering or the application thereof or upon subjects relating thereto and generally to

advance knowledge of chemical engineering.

▪ To print, publish, sell, lend or distribute the proceedings or the reports of the Institution or any papers,

communications, works or treatises on chemical engineering or its application or subjects connected therewith in

the English or any foreign tongue or any abstracts thereof or extracts therefrom.

▪ To co-operate with Government Departments, Universities, other Educational Institutions and public educational

authorities for the furtherance of knowledge of and education in chemical engineering, science or practice.

▪ To publish statements in the public interest for the education or information of the general public on matters

involving the science or application of chemical engineering.

▪ To hold or prescribe examinations or other assessments for candidates for election to Voting and Non-Voting

membership and by requiring standards of knowledge and experience approved by the Institution.

▪ To maintain, under licence from the Engineering Council (UK) or the Science Council, or any other successor

organisations, or any other appropriate organisations, such Register, or parts thereof, as refer to relevant

Chartered Practitioner status or to relevant Technician or other status.

▪ To co-operate with any other organisations to advance the cause of chemical engineering or for economic

purposes related thereto.

▪ To do all other things incidental or conducive to the attainment of the above objects or any of them.

3

Our strategy

The Institution’s Strategy 2022 identified seven key strategic goals and activities to achieve these objects:

▪ Reach out globally to attract, recruit, develop, retain and recognise chemical engineers through internationally

recognised professional qualifications.

▪ Grow our international footprint to become the organisation of choice for chemical engineers.

▪ Involve, enable, and support our members to create a committed and empowered community.

▪ Develop insight and opinion to offer an authoritative voice on issues that affect chemical engineers and chemical

engineering.

▪ Inform and influence others to strengthen relationships with key stakeholders, and become a trusted advisor and

valued contributor.

▪ Embrace digitalisation to deliver content and services anytime, anywhere.

▪ Develop our organisational capability to drive effective and efficient delivery.

Strategy 2022 sets out an aim to achieve these seven strategic goals over a six-year period, from 2017 to 2022. Each

goal is supported by a range of projects and aims, of which progress has already been made in 2017.

Public Benefit

The Institution works to fulfil these goals on a broad international scale, reflecting the global nature of its

membership and of the chemical engineering profession, and bringing benefits to the public and society by

promoting high standards of engineering competence, professional ethics, safety and sustainability, thus enabling

industry and society to receive the benefit from a competent profession and its practitioners.

The Trustees confirm that they have referred to the Charity Commission’s guidance on public benefit when

reviewing the Institution’s aims and objectives and in planning future activities.

4

Achievements and performance

The Institution welcomed a new CEO, Jon Prichard in February 2017. His first year in post was underpinned by a

review of the Institution’s governance, and finalisation of the organisation’s strategy set out in the ‘objectives and

activities’ above.

We will reach out globally to attract, recruit, develop, retain and recognise chemical engineers through

internationally-recognised professional qualifications

IChemE’s 2017 year-end membership total was 42,699 (2016: 44,278). This represents a 4% fall on the previous

year end. The drop can be attributed to several factors; notably the ending of an Affiliate Society agreement with

COIQCV in Spain and further rationalisation of our South African membership list. IChemE also experienced a

higher number of deletions of members in two year’s arrears, notably in South East Asia, with double digit

percentage drops reported for both Malaysia and Singapore. Work on the development of a sustainable membership

model remains a key element of Strategy 2022.

Despite this downward trend, the Institution elected 85 new FIChemE (Fellow) members and 459 MIChemE

(Chartered Chemical Engineer) members in 2017. In addition, there were 1,416 new AMIChemE (Associate)

members (direct route or upgraded from Student/Affiliate).

Training and guidance materials for Chartered Membership, Accredited Company Training Scheme and University

Accreditation Assessors and Interviewers were improved. Over 230 member-volunteers received individual training,

with a further 500 volunteer professional review interviewers completing their online refresher training.

The number of students applying to study undergraduate programmes at UK universities, this has reduced for the

second year, including in most science-based disciplines. The number of applications and in-take for chemical

engineering reduced by 12% and 4% respectively. However, IChemE’s OnCampus work continued and 33

presentations were delivered to chemical engineering students in Australia, Europe, and South East Asia. New

chemical engineering programmes were introduced at the University of Greenwich and Queen Mary University.

Significant enhancement was made to the Institution’s university course accreditation documentation in August. The

changes reflect the introduction of Virtual Accreditation Panels (VAPs), new information on Benchmarking, and

arrangements for joint visits.

Five new degree programmes received IChemE accreditation including Charles Darwin University in Australia’s

Northern Territory; Chester, Huddersfield and Hull in the UK; and the University of Patras – the first university

programme in Greece to receive such recognition. In total, 67 chemical engineering degree programmes were

reviewed in 2017.

We will grow our international footprint to become the organisation of choice for chemical engineers

A diverse range of international activities shaped the Institution’s continued commitment to sharing knowledge and

best practice in 2017.

IChemE Safety Centre (ISC) speakers delivered 12 keynote presentations – in Australia, Bahrain, the Czech

Republic, Malaysia, New Zealand, Norway, Portugal, Singapore, South Africa, Spain, the UK and the US. In

collaboration with the Mary Kay O’Connor Process Safety Center (MKOPSC), ISC also launched Process Safety for

the 21st Century and Beyond at the 10th World Congress of Chemical Engineering in Barcelona, Spain, and at the

annual MKOPSC Symposium in Texas, US.

The report examines current challenges in process safety and sets out the latest thinking from industry, academia and

regulators.

In Malaysia, IChemE delivered the Symposium of Malaysian Chemical Engineers (SOMChE) for the first time –

previous events have been hosted by a Malaysian University. The Institution also recognised a century of progress in

the palm oil sector at a special event –100 Years in the Palm Oil Industry: 50 Years of Process Engineering. The

meeting considered the importance of chemical and process engineering in the sustainable development of the

world’s second-largest palm oil producer.

In October, IChemE in Singapore became a U-Associate of the National Trade Union Congress of Singapore. The

Institution joined a unique alliance of oil, petrochemical, energy and chemicals sector stakeholders to accredit and

raise safety standards among Singapore’s process technicians and engineers.

5

The Middle East also saw a new development with the appointment of Petroleum Development Oman’s Henry

Mangkusasono as an IChemE Senior Ambassador. Mangkusasono’s role was confirmed at the inaugural meeting of

IChemE’s new Omani Member Group, which had over 150 attendees.

The IChemE Global Awards programme recognised excellence in chemical engineering from around the world, with

more than 140 entries from 25 countries in 2017. Ceremonies were held in Birmingham, UK, Kuala Lumpur,

Malaysia, and Singapore.

There was further recognition for outstanding achievement with 22 recipients of IChemE medals and prizes in 2017.

We will involve, enable, and support our members to create a committed and empowered community

IChemE depends on its professional membership to develop the next generation of chemical engineers, influence

policy, and promote best practice.

8 new training courses and 5 new online courses were introduced in 2017. More than 200 delegates participated in

the online training, 150 attended re-vamped HAZOP training, and Henry Kister’s practical distillation technology

training attracted 70 delegates from around the world. In-house company training was delivered in Belgium, Canada

and Finland. A record level of in-company training was delivered through IChemE’s Australian operation during the

year, including process safety training to remote parts of Western Australia and Indonesia.

2017 saw GlaxoSmithKline, GHD, and T Musk Engineering awarded their first Accredited Company Training

Schemes (ACTS), and reaccreditation of a further 14 schemes. ACTS are designed to develop the competencies of

graduate chemical engineers, to help them achieve Chartered status.

Member-led groups continued work to increase knowledge of technical subjects and encourage networking in

specific regions. IChemE’s Water Special Interest Group celebrated their 30th anniversary with a Young Process

Engineer Prize, sponsored by Arup. More than 110 online technical presentations were held, and 34 technical

meetings – including a new Food & Drink conference organised by the Food & Drink Special Interest Group. There

were 168 member events around the world, including 8 in Malaysia, 15 in New Zealand and 4 local annual dinners in

Aberdeen, Cork, Hull and Humberside.

The dissemination of process safety knowledge is critical to ensuring chemical engineers are operating safely,

without risk to themselves or others. The IChemE Safety Centre grew during the year, welcoming 10 new operating

partners; 2 additional operating partners and 6 new industry partners. The Centre also launched a new interactive

case study, part of its interactive training offering. The new addition focuses on process safety challenges within an

offshore platform environment.

Two successful Hazards process safety conferences were delivered in Birmingham, UK and Kuala Lumpur,

Malaysia. Leading motorsport analyst Mark Gallagher delivered the Trevor Kletz Memorial Lecture at Hazards 27

in the UK, drawing parallels between risk management in the world of motorsport and the process industries.

Working with the Process Management & Control Special Interest Group, IChemE delivered Advances in Process

Automation and Control – a specialist conference focusing on automation in the process industries, digitalisation,

and Industry 4.0. Dow Chemical CEO Andrew Liveris gave the welcome address at Chemeca – Australasia’s

premier chemical engineering conference.

We will develop insight and opinion to offer an authoritative voice on issues that affect chemical engineers and

chemical engineering

The UK’s academic and postgraduate community came together for the annual ChemEngDayUK at the University of

Birmingham. 300 participants discussed new developments in research and teaching under the broad theme “Better

Life, Better World”. University College London scooped 5 best poster awards at the event, as well as best three-

minute research highlight talk.

Leading thinker in industrial ecology and sustainability, Professor Roland Clift CBE FIChemE, became the 12th

recipient of the George E Davis Medal in July and delivered a lecture on the role of chemical engineers in delivering

a resource efficient and more sustainable world.

IChemE’s Energy Centre led a workshop at the World Engineers Summit in Singapore. The workshop focussed on

energy issues in the region and the role of chemical engineers in climate change mitigation. The Centre also co-

ordinated IChemE’s response to the energy and clean growth section of the UK government’s Industrial Strategy

Green Paper. This contributed to a collective response from UK engineering, Engineering an economy that works

for all, which was published by the Royal Academy of Engineering in April.

6

IChemE’s BioFutures work programme stepped up a gear with the establishment of four priority work strands:

careers, skills, SMEs, and policy challenges. Member-led groups will work to identify how the Institution can better

engage with, and support, bio-chemical engineers.

Influential members of the Institution were invited to attend Parliamentary Links Day with Jon Prichard, the largest

science event in the Parliamentary calendar. The event saw a record turn-out of scientists and engineers, keen to

discuss how the UK political landscape impacted their industry and work.

Separately, four early-career members were asked to represent the profession at Voice of the Future in Westminster.

The event provided an opportunity for them to cross-examine UK parliamentarians on science and technology policy

issues, and experience life inside the House of Commons.

Postgraduate Erin Johnson, of Imperial College London, UK, was awarded the Ashok Kumar Fellowship 2017 and a

three-month work placement at the Parliamentary Office for Science and Technology (POST). Her parliamentary

briefing note looked at the fire safety of building materials, in response to the UK’s Grenfell Tower tragedy.

Submissions for consideration by IChemE’s learned journals increased by 9% in 2017. Process Safety and

Environmental Protection saw its Impact Factor jump by 40% to 2.905 – the highest ever reported for an IChemE

journal. Chemical Engineering Research and Design also saw continued growth.

We will inform and influence others to strengthen relationships with key stakeholders, and become a trusted

advisor and valued contributor

IChemE’s Corporate Partner programme continued to grow in 2017, helping the Institution to establish productive

links with industry. Amec Foster Wheeler, ExxonMobil, Lilly, and Process Systems Enterprise achieved Gold

Corporate Partner status, with GHD, Jacobs Douwe Egberts, PM Group and Tarmac achieving Bronze.

Active engagement with the Royal Academy of Engineering’s diversity concordat continued with participation in a

sector-wide benchmarking exercise for diversity and inclusion. In July the Institution’s Diversity and Inclusion

Working Group published Social mobility and the chemical engineering profession in the UK. The study examined

the influence of social factors, including childhood household income, on career progression.

IChemE’s contribution to the Future Climate – Engineering Solutions (FC-ES) alliance continued with a well-

attended side meeting at COP23, the United Nations Climate Change Conference in Bonn, Germany. The event

focussed on good practice in national energy planning.

The well-respected IChemE Model Forms of Contract welcomed a new addition with the arrival of The Silver Book.

Drafted with performance-based projects in mind, the publication provides a professional services contract for global

use. It received a positive response from the legal community and was referenced in several legal blogs and articles.

Following a nomination by IChemE, Madeleine Jones, a Chartered Chemical Engineer at Sellafield, UK, was

awarded the Women’s Engineering Society’s Karen Burt Award. The Institution also supported WES through the

promotion of International Women in Engineering Day, sharing case studies that focused on its female cohort.

We will embrace digitalisation to deliver content and services anytime, anywhere

Digitalisation is a key priority for the Institution, and projects will be phased throughout Strategy 2022.

In 2017, this began with a review of the organisations website offering. The lack of smart phone compatibility was

identified as a major issue by members and this functionality is set to become a standard feature for IChemE’s web

presence. A new Content Management System (CMS) to deliver these capabilities was identified following extensive

research by the IT team.

The first IChemE web-platform to undergo changes was www.thechemicalengineer.com – the website for the

Institution’s in-house magazine. It was launched in September, providing members with a great reading experience

via a multitude of platforms – from smartphone devices to tablet computers. A new booking system for events is

currently in development. EventsForce Online Events started to be tested in Q4 of the year.

In terms of back-office operations, Office 2016 was installed for all UK staff, to make way for the migration of email

and desktop services Office 365 – a cloud-based exchange server. Cloud storage, via One Drive has now replaced

individual hard-drives. IChemE aims to become ISO:9001 certified by 2020, so further work on document control

and storage is planned for 2018.

7

We will develop our organisational capability to drive effective and efficient delivery

Following a member consultation launched by IChemE (Immediate Past) President Professor Jonathan Seville in

December 2016, the Institution consulted its members on options for governance reform in August and September

2017. Over 300 members shared their detailed opinions via an online survey and in one-to-one conversations. A

report was prepared, and in October, Council considered the findings. Strong support was evident for several of the

proposals – including more transparency for electing honorary officers, switching from Council to a smaller Board of

Trustees, introducing a Congress to be the voice of the membership and scrutinise the Board, and adopting a ‘hub

and spoke’ approach to the Institution’s international operations.

The pace of change was too slow for some and an Extraordinary General Meeting was called at the end of the year.

This followed a motion of no-confidence in Council submitted by 50 IChemE members. Council tabled an

alternative motion restating confidence in its leadership and seeking approval for the ongoing programme of strategy

and governance reform. The Extraordinary General Meeting took place on 11 January 2018. Council’s position

received clear support from a majority of the voting members who took part.

Key developments on the governance reform process were announced in December in advance of the Extraordinary

General Meeting. This included proposals for a 12-member Board of Trustees to replace Council – with all posts

open for nomination and election by the wider membership – and the creation of a new virtual Congress. The

proposed Congress would scrutinise the Board’s decisions and act as an effective voice for members in all parts of

the Institution. Work also started on the design of the ‘hub and spoke’ management structure - the new arrangements

will deliver aligned self-sufficiency for the different parts of IChemE’s international community.

Council will continue to engage and consult with members on proposed changes to governance in 2018. The

proposals and related changes to the Institution’s Charter and By-Laws will be communicated, and voted on, by

members at the Annual General Meeting in May.

8

Plans for the future

Strategy 2022 will continue to deliver on several frontiers in 2018. In some ways, the year will be shaped by the

outcomes of the AGM in May. The priorities will be based on the seven strategic pillars of Strategy 2022:

Reach Out Globally

▪ Continued progress in the area of qualifications, to ensure a sustainable professional membership. This includes

work on the current registration process, and routes to becoming professionally qualified.

International Footprint

▪ A “Hub & Spoke” model will be introduced, to align IChemE’s international communities with the central

function and improve self-sufficiency

Involve & Enable Members

▪ Further work in member engagement, and the appointment of a UK Country Manager to oversee member group

support.

▪ Following a vote in favour of the governance reform proposals a Congress will be created to act as the ‘voice’ of

membership, to feed into the Board of Trustees.

▪ A Learned Society Committee will be created to consult on the Institution’s policy priorities

Inform & Influence

▪ Improving internal communications to communicate IChemE’s value proposition to key stakeholders – including

members, corporate partners, and other professional engineering bodies

▪ External campaigns that hold engineering and chemical engineers in high regard

Embrace Digitalisation

▪ Members will be provided with an online forum, for members-only to discuss IChemE initiatives

▪ The Institution will turn its focus to centralised document control and storage in 2018 using SharePoint. The

Office365 upgrade will roll-out to international offices, and IChemE’s Task Centre integration software will also

be upgrade in 2018.

Develop Organisational Capability

▪ The Governance Reform proposals will be finalised, and steps taken to ensure the membership is well-informed

before they vote on changes to the Institution’s Charter and By-Laws at the AGM in May 2018. A vote in favour

of the proposals will initiate a transitional period.

▪ IChemE’s processes will be evaluated, with plans for improvement developed – the next step towards ISO:9001

certification

9

Financial Review

The financial statements for the year ended 31 December 2017 are set out on pages 17 to 35.

The consolidated financial statements include the results of the Institution’s UK trading subsidiary IChemE Ltd and

the charitable activities of the Institution's subsidiaries in Australia, Malaysia, New Zealand and Singapore.

Council is pleased to report that 2017 was a positive year financially and the group ended the year ahead of budget.

Unrestricted funds

Total group income for the year was £7,845,000 (2016: £7,663,000). The principal sources of income were:

▪ Membership subscription and accreditation fees totalling £3,765,000 (2016: £3,735,000).

▪ Within the Learned Society activity the delivery of training courses showed signs of a recovery in the second half

of the year with delegate income increasing to £1,685,000 (2016: £1,524,000). Income from journals and

publications saw a further increase to £957,000 (2016: £851,000) largely as a result of the continued growth in

journal sales. Conferences, seminars and events generated £631,000 (2016: £909,000). Income from the

Institution’s knowledge communities, which includes company subscriptions to the IChemE Safety Centre and

Special Interest Group activity, increased to £386,000 (2016: £247,000). Other income generated from

collaboration with other entities was £36,000 (2016: £28,000).

▪ The sale of advertising space through the trading subsidiary IChemE Ltd saw a further decline to £212,000

(2016: £236,000) as anticipated due to organisations continuing to move away from the traditional print to online

advertising.

▪ Within Donations and Legacies £31,000 (2016: £60,000) was received in donations for the whynotchemeng

campaign and in December 2017 the Institution was informed that it had been left a legacy by a former member.

An interim payment of £100,000, which is due to be paid in the first quarter of 2018, has been recognised in the

2017 financial statements and a further sum of money, which at the point of signing the accounts is unknown, will

be paid over on finalisation of the member’s estate.

▪ Dividends and interest on the investment portfolio was £101,000 (2016: £73,000).

Total group expenditure for the year was £7,532,000 (2016: £7,671,000). The decrease in expenditure was largely a

result of the programme of cost reduction measures put in place in 2016 aimed at bringing the Institution back into a

surplus position following a decline in the training and events activity in 2015 and 2016 as companies in the oil and

gas sectors cut their discretionary spend.

After allowing for gains on investments of £247,000 (2016: £439,000) and a transfer from restricted funds of

£402,000 (2016: £nil) the group generated net income of £962,000 (2015: £431,000). The actuarial gain on the

defined benefit pension scheme of £253,000 (2016: loss £3,059,000) resulted in an increase of £1,215,000 (2016:

decrease £2,628,000) in the unrestricted fund balance to £2,384,000 (2016: £1,169,000).

The Institution’s wholly owned trading subsidiary, IChemE Ltd, achieved an operating profit of £95,000 (2016:

£123,000), which has been gift aided to the Institution.

The results of the UK trading subsidiary and of the subsidiary undertakings in Australia, Malaysia, New Zealand and

Singapore are set out in note 2 to the financial statements.

Restricted funds

Restricted funds are income funds that can only be used for specific purposes which have been specified by the

donor, or by the terms applied to an appeal for funds.

During the year, the assets of the European Process Safety Centre were transferred to a new separate legal entity

registered in Belgium, whose objects are aligned to the restrictions placed on the fund. The new entity, which is no

longer under the control of Council, received a transfer of £180,000. A further £55,000 was transferred into

unrestricted funds which represents the settlement of the liability in the defined benefit pension scheme of a former

EPSC staff member.

A transfer of £347,000 was made from the Andrew Legacy Fund to unrestricted funds in 2017. This was to correct

the allocation of income and unrealised gains on investment funds which had been erroneously allocated to restricted

funds in previous years.

10

The net expenditure in restricted funds was £242,000 (2016: net income £5,000). After allowing for a transfer to

unrestricted funds of £402,000 (2016: £nil) the total restricted fund balance at year end was £1,348,000 (2016:

£1,992,000). The movement in restricted income funds is set out in note 17 to the financial statements.

Investment policy and powers

The investment policy adopted by Council is to achieve a target return of CPI + 3% over a 5 year rolling basis and over

a rolling 3 year period to achieve a minimum return of CPI. The Institution’s investment objective remains to achieve

long term capital growth with income.

The investment portfolio for both IChemE and the Andrew legacy restricted fund are split between Rathbones

Investment Management Limited and Ruffer LLP. Both organisations are working to this investment policy and apply

their individual judgement for asset allocation and investment selection to achieve the investment objective.

During the year the investment funds received £101,000 (2016: £94,000) in interest and dividends, and generated

unrealised gains of £247,000 (2016: £573,000). After taking into account management fees of £68,000 (2016:

£75,000) the net return on investment funds was 3.8% (2016: 8.9%) for the year.

The market value of the combined investment funds at 31 December 2017 was £6,825,000 (2016: £6,545,000), of

which £5,585,000 (2016: £4,958,000) relates to the Institution’s unrestricted fund and £1,240,000 (2016:

£1,587,000) relates to the Andrew legacy fund.

All income received during the year has been re-invested. The Institution’s investments are recorded at market

value. The gains and losses on revaluation have been transferred to the Statement of Financial Activities.

Investments are held in accordance with the By-laws of the Institution. Council has the power to invest all monies

not immediately required for operational activities as it sees fit and to appoint advisers to make such investments on

its behalf.

IChemE continues to use the services of an independent financial advisor to review and monitor the investment

portfolio. The performance of the funds was formally reviewed by the Finance & Investment Committee throughout the

year.

Reserves policy

The Finance and Investment Committee reviews the Institution’s reserves policy and level of reserves held on an

annual basis. The Committee considers all relevant information including the three year budget and business plan,

the strategic plan and the risks identified in the risk register.

The current reserves policy adopted by Council is to hold free reserves equivalent to the level of committed costs

plus a margin of 10%. This level of reserves is considered appropriate to demonstrate appropriate financial

management of the Institution and to ensure the financial stability of the Institution in periods where there is a short

to medium term shortfall in operating income.

For 2017, the level of reserves required to meet this policy was £3,500,000. The required level of reserves has

decreased over the last few years as we approach the end of the lease period at our London office.

The level of unrestricted reserves freely available at the year-end was £6,671,000 (2016: £5,646,000).

This level of free reserves is stated before taking account of the pension-funding deficit of £5,344,000 (2016:

£5,615,000) calculated under FRS 102. Due to the extremely long-term nature of the pension reserve, the

unrestricted reserves freely available are considered a more appropriate measure.

The current level of reserves held is in excess of the policy. Council is comfortable holding excess reserves due to:

▪ the potential increase in defined benefit pension scheme contributions which will be determined as part of the

triennial valuation exercise as at 31 January 2018 which is currently underway;

▪ the continuing challenging economic environment in which the Institution operates which led to the drawdown of

reserves in 2015 and 2016 and which is still impacting some of the Institution’s key income streams;

▪ the investment required to meet the Institution’s strategy in the build up to our centenary some of which may

require funding from reserves;

▪ the potential decline in the market value of the investment funds due to the continuing uncertainty in the

investment market.

The total funds held at year end, after taking into account the pension-funding deficit, amounted to £3,732,000

(2016: 3,161,000). The total fund balance includes restricted funds of £1,348,000 (2016: 1,992,000).

Council has considered the level of reserves held at year end and believes they are sufficient to protect it from risk of

insolvency or serious disruption to its work.

11

Structure, Governance and Management

Governing Document

The Institution of Chemical Engineers was founded in 1922 and incorporated by Royal Charter in 1957.

The governing documents under which the Institution operates comprise the Royal Charter, as amended, the By-laws

of the Institution and regulations made from time to time by the Institution’s governing Council.

The Institution is a registered charity in England & Wales and a charity registered in Scotland. The members of

Council are the Trustees of the charity.

In 2016 Council initiated a governance review and following a period of consultation with its members the

Institution will be putting forward proposed changes to its Royal Charter and By-Laws at the Annual General

Meeting in May 2018.

Appointment of Trustees

The members of Council are elected in accordance with the Royal Charter and By-Laws.

Council is made up of:

▪ The Honorary Officers - President, Deputy President, Immediate Past President and Honorary Treasurer all of

whom must be Fellows of the Institution. The President, Deputy President and Honorary Treasurer are elected

annually by Council, with the President usually having been Deputy President in the previous year. The

Presidential Nominations Commission recommends to Council the nominee for Deputy President.

The President serves for a term of one year plus one year preceding that as Deputy President and one year

following as Immediate Past President.

The Honorary Treasurer is eligible for re-election annually up to a maximum of six years.

▪ Four elected ordinary members of whom at least three shall be Fellows or Chartered Members of the Institution.

Ordinary members serve for a term not exceeding four years and at least one ordinary member is elected

annually. In accordance with the By-Laws, voting members are invited to propose alternative nominations to

those put forward by Council. In the event that more than one candidate is nominated for a vacancy, a direct

election is conducted and the results are announced at the Annual General Meeting.

▪ Co-opted members who are appointed by Council and serve for a term not exceeding three years. The By-Laws

currently allow for:

Four co-opted Vice Presidents (Qualifications, Technical, International, Australia);

One co-opted member elected by each country with more than 10% of the voting membership. These additional

co-options currently apply to the UK and Australia;

Not more than three other co-opted members.

Trustee induction and training

All new members of Council receive an induction pack including the By-laws of the Institution, recent Council

minutes, and the relevant Charity Commission publications outlining their roles and responsibilities as a Charity

Trustee. Trustees are also encouraged to attend appropriate external training events where these will facilitate the

undertaking of their role. An annual Trustee induction day is held for all new and existing Trustees to get an

oversight of the structure of the Institution and its activities.

Council members have a legal duty to avoid conflicts of interest so that they can focus exclusively on the best

interests of the Institution. The Institution maintains a register of interest, which is updated annually or when any

changes are reported by Council members. Procedures are in place for managing conflicts of interest that may arise

during Council meetings.

Institution structure

Council is the governing body of the Institution and has ultimate responsibility for the strategic direction of the

Institution and for ensuring that the charitable objects set out in the governing document are met. Council meets at

least six times a year to review performance against these objects.

The Chief Executive is appointed by Council and has delegated authority for the day to day operation of the

Institution and its subsidiary undertakings. The Chief Executive is supported by the Senior Management Team.

12

The Institution’s operations in Australia, Malaysia, New Zealand and Singapore, reported as subsidiary undertakings

in the financial statements, each have their own local Boards operating under delegated authority from Council and

in compliance with local regulatory requirements. In 2013, Council established a similar UK Board to enable

Council itself to focus on strategic matters affecting the profession globally.

The Institution has a wholly owned trading subsidiary in the UK, IChemE Ltd, established to operate the sale of

advertising space in the Institution’s journals and publications. The company gift aids its taxable profits to the

Institution.

There are a number of standing Boards and Committees, operating under delegated authority from Council, which

have been established to facilitate the operation of the charity:

▪ HR & Remuneration Committee

▪ Audit and Risk Committee

▪ Finance and Investment Committee

▪ Nominations Committee

▪ Presidential Nominations Commission

▪ Disciplinary Committee

▪ Qualifications Committee

▪ IChemE Safety Centre Advisory Board

▪ Energy Centre Board

▪ Research Committee

▪ Medals and Prizes Committee

▪ Contracts Committee

▪ Disputes Resolution Committee

In addition, the Institution has an extensive network of National, Regional and Specialist Interest Groups enabling

members to get involved in the Institution’s activities. Each group has its own committee, made up of members of

the Institution, who meet regularly throughout the year. The activities conducted by the Groups include technical

meetings, continuing professional development, schools liaison visits, and networking events.

The Charter, delegated powers, membership and reporting line into Council for all Boards and Committees are set by

Council.

Staff participation is encouraged at all levels in the making of decisions which affect the Institution’s management

and future development. Formal meetings are held to update all staff on the Institution’s activities and other

emerging issues.

Volunteers

All members of Council and of the various Boards and Committees give their time on a voluntary basis. The

voluntary effort and contribution on the part of the members is at the heart of the Institution’s success.

Remuneration policy for key management personnel

The Institution considers its key management personnel to comprise Council, the Chief Executive and the Senior

Management Team. All Council members give their time freely and no Council member received remuneration in

the year. Details of Council member expenses and related party transactions can be found in note 8 and 20 to the

accounts.

The pay of the Chief Executive and Senior Management Team is set by the HR & Remuneration Committee in line

with the Institution’s Remuneration Policy.

The Institution is committed to ensuring that it pays its staff fairly and in a way which ensures it attracts and retains

appropriately qualified staff to lead, manage, support and deliver the Institution’s charitable objects.

The objective of the Policy is to ensure that the Chief Executive and staff team are provided with appropriate

incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded for their

individual contributions to the success of the Institution.

The Policy is based on an aspiration to be the exemplary membership organisation of its type and an articulate

advocate of chemical engineering. In determining remuneration levels, the Committee take into account all factors

which are deemed necessary.

The Committee secure professional advice where appropriate to establish appropriate benchmark levels for each

position or group of positions. These benchmarks rates are reviewed regularly. When inflation is relatively low this

review may not be annual and so an interim inflationary adjustment to the benchmark salary level may be made.

13

New staff will normally be appointed between 80% and 100% of the benchmark rate for their position depending on

prior experience and the calibre of the appointee. They should expect to advance to the benchmark levels by

approximately five percentage points a year assuming a fully satisfactory performance.

The Institution does not employ interns without pay and it complies with the living wage for all staff.

In addition to financial remuneration, the Institution seeks to provide staff with a supportive working environment

and wherever possible works to promote the wellbeing of staff and satisfactory work-life balance.

The appropriateness and relevance of the Remuneration Policy is reviewed annually by the Committee.

Risk management

Council is responsible for overseeing risk management across the organisation and for maintaining a sound system of

internal control that supports the achievement of its strategic aims and objectives. The Audit & Risk Committee is

responsible for assessing the effectiveness of risk management and internal controls across the organisation, and for

reviewing the Institution’s risk policy on an annual basis.

A strategic and operational risk register is maintained by the senior executive team and is formally reviewed on a

quarterly basis. The risk register involves identifying the types of risk the Institution faces, both internally and

externally, prioritising them in terms of potential impact, likelihood and reputational impact, and identifying means

of mitigating those risks or minimising the impact on the Institution should those risks materialise. The risk owners

report annually on the adequacy and effectiveness of the control measures in place. The Audit & Risk committee

regularly review the risk registers, concentrating on the significant strategic risks and their control measures.

A full business case, including a risk log, is populated as part of IChemE’s project management process for all new

ventures and activities. The risk log is maintained by the project leader and reviewed by the senior executive team.

The business planning and budgeting cycle is used to set objectives for the following three years, agree action plans,

allocate resources, and to identify new risks or changes in existing risks or their control measures. Progress towards

meeting the objectives and annual budget is monitored on a monthly basis by the Senior Management Team.

A number of internal policies and procedures form part of the internal control process which are reviewed on a

regular cycle. These include policies and procedures for Finance, HR, IT, Data Protection, Health & Safety,

Conflicts of Interest, Corporate Gifts and Hospitality, Anti-Bribery and Corruption, Acceptance and Refusal of

Donations, and PR.

Council receives an annual report from the Audit & Risk Committee highlighting the top strategic and operational

risks. Key changes in risk items will also be reported to Council as required.

Risks are categorised between governance and management risks, compliance risks, operational risks, financial risks,

reputational risks and external risks. The top risks identified in the risk register in 2017 were:

Risk Mitigation measure

Failure to respond or respond adequately to global

changes in the industry and profession.

Strategy 2022, developed in 2016, was launched in 2017

together with an updated three year business plan. This

includes proposed governance reform and increased

engagement with members and stakeholders to ensure

the Institution remains relevant.

Insufficient IT capacity to deliver the strategy. The three year business plan and budgets include

investment in IT systems and processes.

Over extension of staff resource. The refocused three year business plan has set priority.

Lower priority projects will be deferred where necessary.

Compliance with international legislation. Increased local staff capability and use of local

professional advisors for key legislative areas.

Impact of the defined benefit pension scheme on future

cashflows.

The annual operating budget is set to cover employer

contributions. Free reserves are held in excess of the

reserves policy in case of an increase in the pension

deficit at the triennial valuation in 2018 and subsequent

increase in contribution levels.

Council is satisfied that reasonable steps are being taken to limit the probability and the impact of risk.

14

Statement of Council’s responsibilities

Council is responsible for preparing the trustees' annual report and the financial statements in accordance with

applicable law and regulations.

Charity law requires Council to prepare financial statements for each financial year in accordance with United

Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law).

Under Charity law Council must not approve the financial statements unless they are satisfied that they give a true

and fair view of the state of affairs of the group and charity and of the incoming resources and application of

resources, including the income and expenditure, of the group and charity for that period.

In preparing those financial statements, Council is required to:

▪ select suitable accounting policies and then applies them consistently;

▪ make judgements and estimates that are reasonable and prudent;

▪ state whether applicable UK accounting standards have been followed, subject to any material departures

disclosed and explained in the financial statements;

▪ prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Institution

will continue its activities.

Council is responsible for keeping adequate accounting records that are sufficient to show and explain the charity's

transactions and disclose with reasonable accuracy at any time the financial position of the charity and enable them

to ensure that the financial statements comply with the Charities Act 2011, the Charities and Trustee Investment

(Scotland) Act 2005 and regulations 6 and 8 of the Charities Accounts (Scotland) Regulations 2006. They are also

responsible for safeguarding the assets of the charity and hence for taking reasonable steps for the prevention and

detection of fraud and other irregularities.

Approved by Council on 12 April 2018 and signed on its behalf by:

Mr J McGagh

President

Mr KJ Rivers

Honorary Treasurer

Davis Building

165-189 Railway Terrace

Rugby

CV21 3HQ

15

Independent Auditor's Report to the Trustees of the Institution of Chemical Engineers

Opinion

We have audited the financial statements of the Institution of Chemical Engineers (the ‘charity’)(the ‘parent charity’)

and its subsidiaries (the ‘group’) for the year ended 31 December 2017 which comprise Consolidated and Charity

Statement of Financial Activities, the Group and Charity Balance Sheets, the Consolidated Cash Flow Statement and

notes to the financial statements, including a summary of significant accounting policies. The financial reporting

framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards,

including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (United

Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

▪ give a true and fair view of the state of the group’s and parent charity’s affairs as at 31 December 2017 and of

the group’s and parent charity’s incoming resources and application of resources for the year then ended;

▪ have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

▪ have been prepared in accordance with the requirements of the Charities and Trustee Investment (Scotland) Act

2005, regulations 6 and 8 of the Charities Accounts (Scotland) Regulations 2006 (as amended) and the Charities

Act 2011.

Basis for opinion

We have been appointed auditors under section 44(1)(c) of the Charities and Trustee Investment (Scotland) Act

2005 and under section 151 of the Charities Act 2011 and report in accordance with regulations made under those

Acts.

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable

law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of

the financial statements section of our report. We are independent of the group and parent charity in accordance with

the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s

Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We

believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report

to you where:

▪ the trustees’ use of the going concern basis of accounting in the preparation of the financial statements is not

appropriate; or

▪ the trustees have not disclosed in the financial statements any identified material uncertainties that may cast

significant doubt about the group’s or parent charity’s ability to continue to adopt the going concern basis of

accounting for a period of at least twelve months from the date when the financial statements are authorised for

issue.

Other information

The trustees are responsible for the other information. The other information comprises the information included in

the Annual Report other than the financial statements and our auditor’s report thereon. Our opinion on the financial

statements does not cover the other information and, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in

doing so, consider whether the other information is materially inconsistent with the financial statements or our

knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material

inconsistencies or apparent material misstatements, we are required to determine whether there is a material

misstatement in the financial statements or a material misstatement of the other information. If, based on the work

we have performed, we conclude that there is a material misstatement of this other information, we are required to

report that fact. We have nothing to report in this regard.

16

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Charities Accounts (Scotland) Regulations

2006 (as amended) and the Charities Act 2011 require us to report to you if, in our opinion:

▪ the information given in the Trustees’ Report is not consistent in any material respect with the financial

statements; or

▪ proper and sufficient accounting records have not been kept by the parent charity; or

▪ the parent charity financial statements are not in agreement with the accounting records and returns; or

▪ we have not received all the information and explanations we require for our audit.

Responsibilities of trustees

As explained more fully in the Statement of Trustees’ responsibilities set out on page 14, the trustees are responsible

for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such

internal control as the trustees determine is necessary to enable the preparation of financial statements that are free

from material misstatement, whether due to fraud or error.

In preparing the financial statements, the trustees are responsible for assessing the group and parent charity’s ability

to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going

concern basis of accounting unless the trustees either intend to liquidate the group or parent charity or to cease

operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from

material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with

ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and

are considered material if, individually or in the aggregate, they could reasonably be expected to influence the

economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial

Reporting Council’s website at http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our

auditor’s report.

This report is made solely to the charity’s trustees, as a body, in accordance with section 44(1)(c) of the Charities

and Trustee Investment (Scotland) Act 2005, and regulation 10 of the Charities Accounts (Scotland) Regulations

2006 (as amended) and the Charities Act 2011. Our audit work has been undertaken so that we might state to the

charity’s trustees those matters we are required to state to them in an auditor’s report and for no other purpose. To

the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the charity and its

trustees as a body, for our audit work, for this report, or for the opinions we have formed.

RSM UK Audit LLP

Statutory Auditor

St Philips Point

Temple Row

Birmingham

B2 5AF

Date

RSM UK Audit LLP is eligible to act as an auditor in terms of section 1212 of the Companies Act 2006

17

Consolidated statement of financial activities for the year ended 31 December 2017

Notes Unrestricted

Funds

Restricted

Funds

Total

2017

Unrestricted

Funds

Restricted

Funds

Total

2016

£000 £000 £000 £000 £000 £000

INCOME

Donations & legacies 3 131 - 131 60 - 60

Charitable activities:

Qualifying Chemical Engineers 3,765 - 3,765 3,735 - 3,735

Operating a Learned Society for Chemical Engineers 3,636 29 3,665 3,559 270 3,829

Other trading activities:

Trading operations 2 212 - 212 236 - 236

Other operating income 2 - - - - - -

Investments 5 101 - 101 73 21 94

TOTAL INCOME 7,845 29 7,874 7,663 291 7,954

EXPENDITURE ON

Raising funds:

Trading operations 2 (117) - (117) (113) - (113)

Investment management costs (68) - (68) (58) (17) (75)

Charitable activities:

Qualifying Chemical Engineers (2,716) - (2,716) (2,788) - (2,788)

Operating a Learned Society for Chemical Engineers (4,631) (271) (4,902) (4,712) (403) (5,115)

TOTAL EXPENDITURE (7,532) (271) (7,803) (7,671) (420) (8,091)

Net gains on investments 11 247 - 247 439 134 573

NET INCOME / (EXPENDITURE) 560 (242) 318 431 5 436

Transfer between funds 17 402 (402) - - - -

Actuarial gains/(losses) on defined benefit pension

schemes 21 253 - 253 (3,059) - (3,059)

NET MOVEMENT IN FUNDS 1,215 (644) 571 (2,628) 5 (2,623)

Fund balances brought forward at 1 January 1,169 1,992 3,161 3,797 1,987 5,784

Fund balances carried forward at 31

December

2,384

1,348

3,732

1,169

1,992

3,161

The results relate to the continuing activities of the Institution. The group has no recognised gains or losses other

than the net movement in funds for the year.

The notes on pages 21 to 35 form part of these financial statements.

18

Charity statement of financial activities for the year ended 31 December 2017

Notes Unrestricted

Funds

Restricted

Funds

Total

2017

Unrestricted

Funds

Restricted

Funds

Total

2016

£000 £000 £000 £000 £000 £000

INCOME

Donations & legacies 3 131 - 131 60 - 60

Gift aid from subsidiary company 2 95 - 95 123 - 123

Charitable activities:

Qualifying Chemical Engineers 3,166 - 3,166 3,131 - 3,131

Operating a Learned Society for Chemical Engineers 2,713 29 2,742 2,759 270 3,029

Investments 5 101 - 101 73 21 94

TOTAL INCOME 6,206 29 6,235 6,164 291 6,455

EXPENDITURE ON

Raising funds:

Investment management costs (68) - (68) (58) (17) (75)

Charitable activities:

Qualifying Chemical Engineers (2,453) - (2,453) (2,664) - (2,664)

Operating a Learned Society for Chemical Engineers (3,707) (271) (3,978) (3,850) (403) (4,253)

TOTAL EXPENDITURE (6,228) (271) (6,499) (6,572) (420) (6,992)

Net gains on investments 11 247 - 247 439 134 573

NET INCOME / (EXPENDITURE) 225 (242) (17) 31 5 36

Transfer between funds 17 402 (402) - - - -

Actuarial gains/(losses) on defined benefit pension

schemes 21 253 - 253 (3,059) - (3,059)

NET MOVEMENT IN FUNDS 880 (644) 236 (3,028) 5 (3,023)

Fund balances brought forward at 1 January 147 1,992 2,139 3,175 1,987 5,162

Fund balances carried forward at 31

December

1,027

1,348

2,375

147

1,992

2,139

19

Balance sheets at 31 December 2017

Note Group Charity

2017 2016 2017 2016

£000 £000 £000 £000

Fixed assets

Tangible assets 10 1,057 1,138 1,041 1,119

Investments 11 6,825 6,545 6,825 6,545

7,882 7,683 7,866 7,664

Current assets

Debtors 12 1,198 1,163 1,172 1,162

Cash at bank and in hand 2,459 2,740 684 1,042

3,657 3,903 1,856 2,204

Creditors: Amounts falling due within one year 13 (2,382) (2,769) (1,922) (2,073)

Net current assets 1,275 1,134 (66) 131

Provisions for liabilities 14 (81) (41) (81) (41)

1,194 1,093 (147) 90

Pension scheme funding deficit 21 (5,344) (5,615) (5,344) (5,615)

Total net assets after pension deficit 3,732 3,161 2,375 2,139

Income funds

Fixed asset reserves 1,057 1,138 1,041 1,119

Free reserves 6,671 5,646 5,330 4,643

Pension reserves 21 (5,344) (5,615) (5,344) (5,615)

Unrestricted funds 2,384 1,169 1,027 147

Restricted income funds 17 1,348 1,992 1,348 1,992

3,732 3,161 2,375 2,139

These financial statements were approved by the Council and authorised for issue on 12 April 2018.

Mr J McGagh

President

Mr K Rivers

Honorary Treasurer

20

Consolidated cash flow statement for the year ended 31 December 2017

2017 2016

Note £000 £000

Cash flows from operating activities 19 (226) (35)

Cash flows from investing activities:

Dividends and interest from investments 5 101 94

Purchase of fixed asset investments 11 (101) (94)

Disposal of fixed asset investments 11 - 500

Purchase of furniture and equipment 10 (25) (5)

Net cash (used in)/provided by investing activities (25) 495

Change in cash and cash equivalents in the reporting period (251) 460

Cash and cash equivalents at the start of the reporting period 2,740 2,043

Change in cash and cash equivalents due to exchange rate movements (30) 237

Cash and cash equivalents at the end of the reporting period 2,459 2,740

Charity cash flow statement for the year ended 31 December 2017

2017 2016

Note £000 £000

Cash flows from operating activities 19 (342) (296)

Cash flows from investing activities:

Dividends and interest from investments 5 101 94

Purchase of fixed asset investments 11 (101) (94)

Disposal of fixed asset investments 11 - 500

Purchase of furniture and equipment 10 (16) (1)

Net cash (used in)/provided by investing activities (16) 499

Change in cash and cash equivalents in the reporting period (358) 203

Cash and cash equivalents at the start of the reporting period 1,042 815

Change in cash and cash equivalents due to exchange rate movements - 24

Cash and cash equivalents at the end of the reporting period 684 1,042

21

Notes forming part of the financial statements for the year ended 31 December 2017

1 Accounting policies

Basis of preparation

The financial statements have been prepared in accordance with the Statement of Recommended Practice:

Accounting and Reporting by Charities preparing their accounts in accordance with the Financial Reporting Standard

applicable in the UK and Republic of Ireland (FRS 102) (effective 1 January 2015) – (Charities SORP (FRS 102));

and the Charities Act 2011, the Charities and Trustee Investment (Scotland) Act 2005 and regulations 6 and 8 of the

Charities Accounts (Scotland) Regulations 2006.

The financial statements have been prepared under the historical cost convention with items recognised at cost or

transaction value unless otherwise stated in the relevant note(s) to these accounts.

The financial statements are presented in Sterling (£).

The Institution meets the definition of a public benefit entity as defined by FRS 102.

Income and expenditure on charitable activities has been reclassified into two new headings in the financial

statements to better align with the new strategy and business plan. There is no impact on the net income for 2016 as

a result of this reclassification.

Preparation of the accounts on a going concern basis

Council consider that there are no material uncertainties about the Institution’s ability to continue as a going concern.

In arriving at this decision Council has taken into account the group’s financial performance, operational budgets for

the period 2018 to 2020, and the reserves position as at 31 December 2017. Council therefore consider it

appropriate to continue to prepare the financial statements on a going concern basis.

The principal accounting policies adopted by the Institution are set out below:

Basis of consolidation

The financial statements consolidate the financial statements of the charity, its wholly owned UK trading subsidiary

IChemE Ltd and its not-for-profit subsidiaries IChemE in Australia, IChemE in Malaysia, IChemE in New Zealand and

IChemE in Singapore Ltd, by virtue of the control exercised by the charity. The results of the subsidiaries are

consolidated on a line by line basis. The results of the subsidiaries are summarised in note 2 of the financial statements.

Income

Income is recognised when the Institution has entitlement to the income, any performance conditions attached to the

income have been met, it is probable that the income will be received, and the amount can be measured reliably.

Donations are recognised when the Institution has entitlement to the funds, it is probable that the income will be

received, and the amount can be measured reliably.

Legacy gifts are recognised on a case by case basis following the granting of probate when the administrator of the

estate has communicated in writing both the amount and settlement date. In the event that the gift is in the form of

an asset other than cash or financial asset traded on a recognised stock exchange, recognition is subject to the value

of the gift being reliably measurable with a degree of reasonable accuracy and the title to the asset having been

transferred to the charity.

Subscriptions and events income are accounted for in the year to which they apply. Subscription income received

during the year that relates to a subsequent financial accounting period is carried forward as a creditor in the balance

sheet and shown as deferred income.

Interest and dividends on investments are accounted for when receivable.

Expenditure

Liabilities are recognised as expenditure as soon as there is a legal and constructive obligation committing the

Institution to the expenditure, it is probable that settlement will be required, and the amount of the obligation can be

measured reliably.

All expenditure is included in the statement of financial activities on an accruals basis.

22

1 Accounting policies (continued)

Expenditure is recorded net of value added tax unless irrecoverable.

All expenditure, including support costs, are allocated or apportioned to the applicable expenditure headings in the

statement of financial activities.

Allocation of support and governance costs

Governance costs comprise all costs involving the public accountability of the charity and its compliance with

regulation and good practice.

Governance and support costs relating to charitable activities have been apportioned on the basis of staff costs

associated with each activity. The allocation of support and governance costs is analysed in note 7.

Operating leases

Operating lease rentals are charged to the statement of financial activities on a straight line basis over the terms of

the lease.

Tangible fixed assets and depreciation

Fixed assets are recorded at cost or valuation, net of depreciation and any provision for impairment. Expenditure on

individual fixed assets costing over £500 is capitalised.

Depreciation is charged on a straight line basis to write off the cost or valuation less the estimated residual value of

assets over their estimated useful lives as at the following rates:

Freehold buildings - 5%

Leasehold buildings - 11% - 20%

Office equipment - 15%

Computer software - 33%

Freehold land is not depreciated.

Freehold property at Rugby was valued on the basis of open fair value for their existing use by Chartered Surveyors

in 1999. Depreciation is charged on the building element of property at Rugby at the rate of 5% per annum.

Investments

Fixed asset investments are initially recorded at their transaction value and subsequently measured at their fair value

as at the balance sheet date using the closing bid price. The statement of financial activities includes the net gains or

losses arising on revaluation and disposals throughout the year.

Realised gains or losses on investments are calculated as the difference between the sales proceeds and their fair

value at 31 December (or historical cost if purchased within the year). Unrealised gains or losses are derived from

the movement in fair values during the year.

The Institution does not acquire put options, derivatives or other complex financial instruments.

Fund accounting

The Institution has different types of funds which require separate disclosure. These are as follows:

▪ Restricted income funds

These are earmarked by the donor for specific purposes within the overall aims of the Institution. The income

generated must be used in accordance with the specific purpose.

▪ Unrestricted funds

Unrestricted funds comprise funds which are expendable at the discretion of the Council in connection with the

objects of the Institution.

Foreign exchange gains and losses

Foreign currency transactions are translated into sterling at the rates ruling when they occurred. Foreign currency

monetary assets and liabilities are translated at the rates ruling at the balance sheet dates. Any differences are taken

through the statement of financial activities.

23

1 Accounting policies (continued)

Pension costs

Employees of the charity are entitled to join a group personal pension plan. This is a defined contribution pension

scheme with assets held in the names of the individual members and managed by Standard Life Assurance Co Ltd.

The charity contribution is restricted to the contributions disclosed in note 21. The costs of the defined contribution

scheme are included within staff costs and are charged to the statement of financial activities in the year in which

they become payable.

The charity also operates a defined benefit pension scheme. The scheme was closed to new members and future

service accruals in 2006. The assets of the scheme are held separately from those of the Institution in an

independently administered fund.

The difference between the fair value of the assets held in the defined benefit pension scheme and the scheme’s

liabilities measured on an actuarial basis using the projected unit method are recognised in the balance sheet as a

pension asset or liability as appropriate. Changes in the defined pension scheme asset or liability arising from factors

other than cash contribution by the Institution are charged to the Statement of Financial Activities in accordance with

FRS 102.

Provisions

Provisions are recognised when the Institution has a present obligation, legal or constructive, as a result of a past

event, it is probable that the Institution will be required to settle the obligation, and a reliable estimate can be made

of the amount of the obligation.

Financial instruments

Financial assets, other than fixed asset investments, are initially measured at transaction price (including transaction

costs) and subsequently held at cost, less any impairment.

Financial liabilities are classified according to the substance of the financial instrument’s contractual obligations,

rather than the financial instrument’s legal form. Financial liabilities are initially measured at transaction price

(including transaction costs) and subsequently held at amortised cost.

Judgements in applying accounting policies and key sources of estimation uncertainty

In preparing these financial statements, Council is required to make judgements, estimates and assumptions about the

carrying amounts of assets and liabilities. The estimates and associated assumptions are based on historical

experience and other factors that are considered to be relevant. Actual results may differ from those estimates and

underlying assumptions are continually reviewed.

The following are critical judgements that Council has made in the process of applying the Institution's accounting

policies:

▪ determining whether leases entered into by the group either as a lessor or a lessee are operating leases or finance

leases. These decisions depend on an assessment of whether the risks and rewards of ownership have been

transferred from the lessor to the lessee on a lease by lease basis.

Other key sources of estimation uncertainty:

▪ Tangible fixed assets (see note 10). Tangible fixed assets are depreciated over their useful lives taking into

account residual values where appropriate. The actual lives of these assets are assessed annually and may vary

depending on a number of factors. In assessing asset lives, factors such as life cycle and maintenance

programmes are taken into account. Residual value assessments consider issues such as the remaining life of the

asset and project disposal values.

▪ Trade debtors (see note 12). At each reporting date, trade debtors are assessed for recoverability. If there is any

evidence of impairment, the carrying amount of the debtor is reduced to its recoverable amount. The impairment

loss is recognised immediately in the income statement.

▪ Pensions costs (see note 21). The defined benefit pension scheme obligations are based on actuarial assumptions

such as discount rate, the expected rate of return on scheme assets, and mortality rates, which are extensively

detailed in note 21.

24

2 Results of subsidiaries

The summary financial performance and position of the subsidiaries is shown below:

IChemE

Ltd

IChemE in

Australia

IChemE in

Malaysia

IChemE in

New Zealand

IChemE in

Singapore

Ltd

2017

Total

2016

Total

£000 £000 £000 £000 £000 £000 £000

Income 212 1,167 262 92 - 1,733 1,622

Expenditure (117) (825) (239) (87) (2) (1,270) (1,241)

Net Income / Expenditure 95 342 23 5 (2) 463 381

Amount gift aided to the

Institution

(95) - - - - (95) (123)

Retained in subsidiary - 342 23 5 (2) 368 258

Balance sheets

IChemE

Ltd

IChemE in

Australia

IChemE in

Malaysia

IChemE in

New Zealand

IChemE in

Singapore

Ltd

2017

Total

2016

Total

£000 £000 £000 £000 £000 £000 £000

Fixed assets 5 8 3 - - 16 19

Current assets 74 1,791 145 198 - 2,208 2,133

Current liabilities (79) (455) (251) (75) (8) (868) (1,130)

Net current assets (5) 1,336 (106) 123 (8) 1,340 1,003

Total net assets - 1,344 (103) 123 (8) 1,356 1,022

IChemE Ltd (company number 2817128) is a company limited by shares, incorporated in the United Kingdom.

IChemE in Australia (ABN 75112253040) is a registered charity in Australia.

IChemE in Malaysia (PPM-026-14-23111988) is a registered society in Malaysia.

IChemE in New Zealand (society number 980425) is an incorporated society in New Zealand.

IChemE in Singapore Ltd (201523087E) is a company limited by guarantee in Singapore.

3 Income from donations and legacies

Group and Charity 2017 2016

£000 £000

Donations 31 60

Legacies 100 -

131 60

The donations received were in support of the Institution’s whynotchemeng campaign.

25

4 Analysis of income from charitable activities

Group Charity

2017 2016 2017 2016

£000 £000 £000 £000

Qualifying Chemical Engineers:

Membership subscription and accreditation fees 3,765 3,735 3,166 3,131

Operating a Learned Society for Chemical Engineers:

Journals & publications 957 851 957 851

Knowledge communities 386 289 93 41

Conferences, seminars & events 572 867 480 683

Provision of training 1,685 1,524 1,150 1,156

Other income 36 28 33 28

Subscriptions to technical centres (restricted funds) 29 270 29 270

7,430 7,564 5,908 6,160

5 Investment income

Group and Charity 2017 2016

£000 £000

Interest receivable 11 19

Dividends receivable 90 75

101 94

6 Analysis of expenditure on charitable activities

Group Direct

activity

costs

Support

costs

2017

Total

2016

Total

£000 £000 £000 £000

Qualifying Chemical Engineers 1,658 1,058 2,716 2,788

Operating a Learned Society for Chemical Engineers 3,718 1,184 4,902 5,115

5,376 2,242 7,618 7,903

Expenditure on charitable activities was £7,618,000 (2016: £7,903,000) of which £7,347,000 was unrestricted (2016:

£7,500,000) and £271,000 was restricted (2016: £403,000).

Charity Direct

activity

costs

Support

costs

2017

Total

2016

Total

£000 £000 £000 £000

Qualifying Chemical Engineers 1,486 967 2,453 2,664

Operating a Learned Society for Chemical Engineers 2,927 1,051 3,978 4,253

4,413 2,018 6,431 6,917

26

6 Analysis of expenditure on charitable activities (continued)

Net income for the year is stated after charging / (crediting):

Group Charity

2017 2016 2017 2016

£000 £000 £000 £000

Depreciation 106 185 94 174

Operating leases:

Plant and machinery 18 24 15 21

Land and buildings 240 197 189 153

Exchange rate differences 16 (221) (18) (78)

7 Analysis of governance and support costs

Included within expenditure on charitable activities are governance and support costs amounting to £2,242,000

(2016: £2,195,000). These are analysed as:

Group Charity

2017

£000

2016

£000

2017

£000

2016

£000

Staff costs 1,005 1,215 904 1,106

Finance 121 (73) 92 71

IT 210 274 199 261

Facilities & HR 710 628 641 560

Management 67 100 63 97

Governance costs 129 51 119 38

2,242 2,195 2,018 2,133

Finance costs for the group include exchange differences arising on the translation of the assets and liabilities of the

Institution’s overseas subsidiaries from their functional currency to sterling (£) using the closing exchange rate. The

total amount included in finance costs was an exchange loss of £34,000 (2016: exchange gain £143,000).

The governance and support costs have been apportioned across the charitable activities on the basis of staff time

associated with each activity. The charge to each activity was as follows:

Group Charity

2017

£000

2016

£000

2017

£000

2016

£000

Qualifying Chemical Engineers 1,058 1,066 967 1,071

Operating a Learned Society for Chemical Engineers 1,184 1,129 1,051 1,062

2,242 2,195 2,018 2,133

Analysis of governance costs:

Group Charity

2017

£000

2016

£000

2017

£000

2016

£000

External audit 25 32 17 23

General meeting costs 21 6 20 6

Legal & professional fees 83 13 82 9

129 51 119 38

27

8 Analysis of trustee remuneration and expenses

Group and Charity 2017 2016

£000 £000

Expenses paid to or on behalf of 12 (2016:10) Council members in

respect of travel, subsistence and accommodation costs

27 34

Council members give freely their time and expertise without any form of remuneration or other benefit in cash or

kind (2016: £nil).

9 Analysis of staff costs and remuneration to key management personnel

The average monthly headcount for the group and charity during the year was 96 (2016: 100). The number of full

time equivalent persons employed by the group and charity during the year was as follows:

Group Charity

2017 2016 2017 2016

Qualifying Chemical Engineers 31 34 27 29

Operating a Learned Society for Chemical Engineers 31 35 25 30

Management and Administration 24 24 22 22

86 93 74 81

The aggregate payroll costs of these persons were as follows:

Group Charity

2017 2016 2017 2016

£000 £000 £000 £000

Wages and salaries 3,035 3,408 2,509 2,900

Social security costs 252 279 251 279

Pension scheme contributions 283 284 232 231

Defined benefit pension scheme operating costs 67 87 67 87

Employee benefits 42 70 41 68

3,679 4,128 3,100 3,565

During 2017, £29,000 (2016: £210,000) was paid out as redundancy or termination payments.

The numbers of employees, including the Chief Executive, whose total employee benefits, excluding employer

pension contributions, exceeded £60,000, fell within the following ranges:

Group Charity

2017 2016 2017 2016

£60,001 - £70,000 2 1 1 -

£70,001 - £80,000 2 3 2 3

£80,001 - £90,000 1 3 1 2

£90,001 - £100,000 2 2 1 1

£100,001 - £110,000 1 - - -

£160,001 - £170,000 1 - 1 -

£260,001 - £270,000 - 1 - 1

The number of employees who earned more than £60,000 for whom pension benefits are accruing under the defined

contribution pension scheme is 7 (2016: 7). Contributions in respect of these employees amounted to £62,000

(2016: £64,000).

The Institution considers its key management personnel to comprise Council, the Chief Executive and the Senior

Management Team. The total employment benefits of 8 (2016: 8) key management personnel staff, including

employer pension contributions and employer’s national insurance, were £871,000 (2016: £971,000).

28

10 Tangible fixed assets

Group Freehold

Property

Short

leasehold

property

Office

equipment

Computers Total

£000 £000 £000 £000 £000

Cost or valuation

At beginning of year 1,800 220 287 541 2,848

Additions - - - 25 25

Disposals - - - (70) (70)

At end of year 1,800 220 287 496 2,803

Depreciation

At beginning of year 699 220 269 522 1,710

Charge for the year 76 - 10 20 106

Disposals - - - (70) (70)

At end of year 775 220 279 472 1,746

Net book value

At 31 December 2017 1,025 - 8 24 1,057

At 31 December 2016 1,101 - 18 19 1,138

Charity Freehold

Property

Short

leasehold

property

Office

equipment

Computers Total

£000 £000 £000 £000 £000

Cost or valuation

At beginning of year 1,800 202 287 490 2,779

Additions - - - 16 16

Disposals - - - (61) (61)

At end of year 1,800 202 287 445 2,734

Depreciation

At beginning of year 699 202 269 490 1,660

Charge for the year 76 - 10 8 94

Disposals - - - (61) (61)

At end of year 775 202 279 437 1,693

Net book value

At 31 December 2017 1,025 - 8 8 1,041

At 31 December 2016 1,101 - 18 - 1,119

Freehold property at 31 December 2017 includes land at valuation of £280,000 (2016 £280,000) which is not

depreciated.

29

11 Fixed asset investments

Group and Charity 2017 2016

£000 £000

Fair value at 1 January 6,545 6,452

Acquisitions at cost 1,217 2,455

Proceeds of disposals (1,184) (2,935)

Net gain on revaluation 247 573

Fair value at 31 December 6,825 6,545

Historical cost at 31 December 4,916 4,883

All investments are carried at their fair value. An analysis of the fair value of the investments at 31 December 2017

is as follows:

Group and Charity 2017 2016

£000 £000

Equities 3,905 3,709

Fixed Interest 1,809 1,695

Cash 826 578

Other 285 563

Investments in Subsidiaries

The Charity holds 2 shares of £1 each in its wholly owned trading subsidiary company IChemE Ltd which is

incorporated in the United Kingdom. These are the only shares allotted, called up and fully paid. The activities and

results of this company is summarised in note 2.

12 Debtors

Group Charity

2017 2016 2017 2016

£000 £000 £000 £000

Trade debtors 697 763 479 370

Amount due from subsidiaries - - 254 416

Other debtors 31 26 38 44

Prepayments and accrued income 470 374 401 332

1,198 1,163 1,172 1,162

13 Creditors: amounts falling due within one year

Group Charity

2017 2016 2017 2016

£000 £000 £000 £000

Trade creditors 253 571 242 512

Amount due to subsidiaries - - 96 -

Other creditors 156 266 63 141

Taxation and social security 105 106 64 62

Accruals 246 247 219 226

Deferred income 1,622 1,579 1,238 1,132

2,382 2,769 1,922 2,073

Deferred income relates to annual subscriptions payments and events income which have been paid to the Institution

in advance. All deferred income is released to the statement of financial activities in the following year.

30

14 Provisions for liabilities

Group Charity

2017 2016 2017 2016

£000 £000 £000 £000

At 1 January 2017 41 - 41 -

Charged to Statement of Financial Activities 40 41 40 41

At 31 December 2017 81 41 81 41

An additional provision of £40,000 (2016: £41,000) has been made for costs relating to dilapidation expenses for the

leasehold premises in London. A provision for the total expected dilapidation cost will be made over a three-year

period which will be realised in November 2018 when the current lease on the premises expires.

15 Commitments

Total future commitments under non-cancellable operating leases are as follows:

Group 2017 2016

Land and

buildings

Other Land and

Buildings

Other

£000 £000 £000 £000

Operating leases which expire:

In less than one year 231 18 272 18

In the second to fifth years inclusive 28 13 251 32

259 31 523 50

Charity 2017 2016

Land and

buildings

Other Land and

Buildings

Other

£000 £000 £000 £000

Operating leases which expire:

In less than one year 184 15 231 15

In the second to fifth years inclusive 7 13 211 29

191 28 442 44

A first charge of £500,000 has been placed on the freehold premises at Rugby in favour of the Defined Benefit

Pension Scheme. The charge was registered in March 2017.

16 Financial instruments

Group Charity

2017 2016 2017 2016

£000 £000 £000 £000

Financial assets

Financial assets measured at fair value 6,825 6,545 6,825 6,545

Financial assets measured at amortised cost 728 789 771 830

Financial liabilities

Financial liabilities measured at amortised cost 655 1,084 620 879

Financial assets measured at fair value comprise fixed asset investments. Financial assets measured at amortised cost

comprise trade debtors, other debtors and amounts owed by subsidiary companies. Financial liabilities measured at

amortised cost comprise trade creditors, other creditors, amounts owed to subsidiary companies and accruals.

31

17 Analysis of movements in restricted funds

Group and Charity International

Process

Safety Group

(IPSG)

European

Process

Safety Centre

(EPSC)

John Collier

Memorial

Fund

Andrew

Legacy

Fund

Total

£000 £000 £000 £000 £000

At 1 January 2017 58 245 37 1,652 1,992

Income 28 1 - - 29

Expenditure (28) (191) - (52) (271)

Transfer between funds - (55) - (347) (402)

At 31 December 2017 58 0 37 1,253 1,348

The John Collier Memorial Fund seeks to have a two yearly Lecture and Medal ceremony. The capital and the

income generated are to be used to fund the award and lectures in perpetuity.

The IPSG and EPSC funds relate to international industry funded technical centres administered in accordance with

each Group’s Statute. During the year, the assets of EPSC were transferred to a new separate legal entity registered

in Belgium, whose objects are aligned to the restrictions placed upon the fund. The new entity, no longer under the

control of Council, received a transfer of £180,000. A further £55,000 was transferred into unrestricted funds which

represents the settlement of the liability in the defined benefit pension scheme of a former EPSC staff member.

The Andrew Legacy Fund seeks to hold an annual medal lecture on the theme of ‘The Science of Formulation of

Heterogeneous Catalysts’ and to support academic research in enhancing the science of formulation of

heterogeneous catalysts. The Institution has set up the Andrew Fellowship which funds up to two early career

researchers a year to undertake research in the field of Heterogeneous Catalysts. The Fellowship consists of a

stipend of £10,000 a year plus £5,000 a year in expenses for a period of up to four years. The majority of the Fund

balance was transferred to investments in 2012. The income and unrealised gains on the investment fund was

incorrectly allocated to restricted funds in the financial statements for 2012 to 2016 and has been corrected by way

of a transfer of £347,000 to unrestricted funds in 2017.

18 Analysis of group and charity net assets between funds

Fund balances at 31 December 2017 are represented by:

Group Unrestricted

funds

Restricted

Funds

Total

£000 £000 £000

Tangible fixed assets 1,057 - 1,057

Investments 5,585 1,240 6,825

Pension scheme funding deficit (5,344) - (5,344)

Net current assets / (liabilities) 1,167 108 1,275

Provision for liabilities (81) - (81)

Total net assets 2,384 1,348 3,732

Charity Unrestricted

funds

Restricted

Funds

Total

£000 £000 £000

Tangible fixed assets 1,041 - 1,041

Investments 5,585 1,240 6,825

Pension scheme funding deficit (5,344) - (5,344)

Net current assets / (liabilities) (174) 108 (66)

Provision for liabilities (81) - (81)

Total net assets 1,027 1,348 2,375

32

19 Reconciliation of net movement in funds to net cash flow from operating activities

Group 2017 2016

£000 £000

Net Income 318 436

Adjustments for:

Depreciation on tangible fixed assets 106 185

(Gains) on investments (247) (573)

Dividends and interest from investments (101) (94)

Investment management fees 68 75

Difference between pension charge and cash contribution (18) (70)

Decrease / (increase) in debtors (35) (23)

(Decrease) / increase in creditors (387) 225

Increase in provisions 40 41

Change in cash and cash equivalents due to exchange rate movements 30 (237)

Net cash (used in) operating activities (226) (35)

Charity 2017 2016

£000 £000

Net Income (17) 36

Adjustments for:

Depreciation on tangible fixed assets 94 174

(Gains) on investments (247) (573)

Dividends and interest from investments (101) (94)

Investment management fees 68 75

Difference between pension charge and cash contribution (18) (70)

(Increase) / decrease in debtors (10) 109

(Decrease) / increase in creditors (151) 30

Increase in provisions 40 41

Change in cash and cash equivalents due to exchange rate movements - (24)

Net cash (used in) operating activities (342) (296)

20 Related party transactions

During the year recharges have been made between the charity and its subsidiary undertakings. These relate to direct

costs and staff costs incurred by one party on behalf of the other, and for income collected by the overseas

subsidiaries from members for third party registrations fees, journal subscription fees and benevolent fund donations.

The net amount recharged was:

Net amount recharged from / (to)

the charity in the year

Balance outstanding at year end

included in debtors / (creditors) for

the charity

2017 2016 2017 2016

£000 £000 £000 £000

IChemE Ltd 31 33 74 160

IChemE in Australia 119 103 (96) 55

IChemE in Malaysia 20 (32) 168 180

IChemE in New Zealand 9 27 5 16

IChemE in Singapore Ltd 2 5 7 5

181 136 158 416

IChemE Ltd gift aids its operating profit to the charity and the balance of £95,000 (2016: £123,000) is included in

debtors for the charity at year end. The part-time employee of the New Zealand subsidiary has free use of hot

desking facilities at the offices of PDV Consultants, which is owned by Mr David Platts, a current Council member.

33

21 Pension scheme

Defined contribution scheme

The Institution’s defined contribution pension scheme was established in April 2006 following the closure of the

defined benefit scheme. The assets of the scheme are held separately from those of the charity and are currently

administered by Standard Life Assurance Co Ltd. The Institution pays one and a half times the percentage that the

employee contributes up to a maximum of 12%. The total pension cost charge to the Institution, representing

contributions payable to the fund amounted to £223,000 (£2016: £222,000).

Pension costs relating to the employees of the Institution’s subsidiaries IChemE in Australia, IChemE in Malaysia,

IChemE in New Zealand and IChemE in Singapore Ltd amounted to £60,000 (2016: £62,000).

Defined benefit scheme

The Institution operates a defined benefit pension arrangement called the Institution of Chemical Engineers Pension

Scheme. The Scheme provides benefits based on salary and length of service on retirement, leaving service or death.

In 2006, the Scheme was closed to new members, future service accruals and salary revaluations were limited with

effect from 5 April 2006.

The scheme is funded with the assets being held by the pension scheme’s trustees separately from the assets of the

Institution.

The Scheme is subject to the Statutory Funding Objective under the Pensions Acts 2004. A valuation of the Scheme

is carried out at least every three years to determine whether the Statutory Funding Objective is met. As part of the

process the Institution must agree with the trustees of the Scheme the contributions to be paid to address any shortfall

against the Statutory Funding Objective.

The most recent comprehensive actuarial valuation of the Scheme was carried out as at 31 January 2015. The results

of that valuation are updated by an independent qualified actuary on an annual basis allowing for cashflows in and

out of the Scheme and for changes to assumptions over that period. A triennial valuation is being conducted as at 31

January 2018 but has not yet been finalised at the date of this report.

Based on the current recovery plan, the annual contribution level from the Institution into the Scheme will increase

to £265,000 in 2018. In addition, administrative and other expenses of the Scheme are payable separately by the

Institution.

The Institution has also provided additional security to the Scheme by way of a charge of £500,000 on the freehold

property in Rugby. The security agreement to put the charge in place was submitted to the Land Registry in March

2017.

The principal assumptions used to calculate Scheme liabilities include:

2017 2016

% %

Discount rate 2.6% pa 2.8% pa

RPI Price Inflation 3.4% pa 3.5% pa

CPI Price Inflation 2.4% pa 2.5% pa

Pension increases applied to pensions accrued on or

after 6 April 1997 2.3% pa 2.4% pa

Revaluation in deferment 2.4% pa 2.5% pa

Long term expected rate of return on the Scheme’s

assets net of expenses 2.6% pa 2.8% pa

Mortality assumption (see table below)

90% of ‘S2NA’ tables with CMI

2016 projections and a long-term

rate of improvement of 1.25% pa

90% of ‘S2NA’ tables with CMI

2015 projections and a long-term

rate of improvement of 1.25% pa

Tax-free cash

All members are assumed to take

25% of their pension as tax-free

cash

All members are assumed to take

25% of their pension as tax-free

cash

34

21 Pension scheme (continued)

The major categories of assets are as follows:

Asset category 2017 2016

£000 £000

Liability Driven Investment (LDI) 2,044 -

Multi-asset funds 5,629 7,349

Cash 48 33

Total 7,721 7,382

The return on the Scheme’s assets (net of investment manager expenses) over the period to the Review Date was

approximately 7.2%.

Amounts recognised in the balance sheet at 31 December 2017:

2017 2016

£000 £000

Fair Value of Assets 7,721 7,382

Present Value of Funded Obligations (13,065) (12,997)

(Deficit) in Scheme* (5,344) (5,615)

Amounts recognised in the statement of financial activities over the year:

2017 2016

£000 £000

Interest on liabilities 359 415

Interest on assets (204) (314)

Total 155 101

Remeasurements over the year:

2017 2016

£000 £000

(Gain) / loss on scheme assets in excess of interest (328) 651

(Gains) from changes to demographic assumptions (278) (323)

Losses from changes to financial assumptions 353 2,731

Total (253) 3,059

35

21 Pension scheme (continued)

Reconciliation of assets and defined benefit obligation:

The change in the defined benefit obligation over the period was:

2017 2016

£000 £000

Value of liabilities at the beginning of the period 12,997 10,590

Interest cost 359 415

Benefits paid (366) (416)

Changes to demographic assumptions (278) (323)

Changes to financial assumptions 353 2,731

Defined benefit obligation at end of period 13,065 12,997

2017 2016

£000 £000

Actuarial gains / (losses) 253 (3,059)

The cumulative amount of actuarial gains / (losses) recognised in the statement of financial activities is (£5,844,000)

(2016: (£6,097,000)).

The annual contribution level for the period 1 February 2018 to 31 January 2019 will be increased in line with the

current Recovery Plan from £173,094 to £265,000.

2017 2016

£000 £000

Value of assets at beginning of period 7,382 7,965

Interest on assets 204 314

Institution contributions 173 170

Benefits paid (366) (416)

Return on assets less interest 328 (651)

Value of assets at end of period 7,721 7,382